Freeze-preventing freeze


As Liz Truss takes charge, and presumably introduces a freeze or revised cap on energy prices, in order to protect millions of people who would otherwise be unable to keep warm this winter, numerous questions arise. How will her scheme work? How will it be paid for and by whom? How will energy suppliers be protected from a wave of bankruptcy that far outstrips what we saw a year ago? Will future generations be left with an even greater debt burden than they already have to shoulder? Will the government attempt to recover some of the high profits of upstream producers and power generators? Will consumers who have recently signed up to new contracts be reimbursed – and if so, how? How will back-to-back contracts and hedges be treated: there is scope here for any reimbursement going to the wrong recipient. Any reimbursement would surely have to be after the fact as future consumption levels are unknown, so will there be cashflow issues? How will tenants be treated?

It all feels potentially very messy. A better approach would be handouts to consumers. Apart from being simpler, the handout approach wouldn’t mess with prices, which help us wake up to the value of energy. And any revised cap level is arbitrary.

Based on indications so far, it seems the Truss government will not be rushing to encourage people to use less energy. Its apparent reticence matches the national mood. The EU might be talking openly about a 15% reduction in consumption, but in the UK the idea is anathema. Here, we become indignant if anyone suggests – as is occasionally reported – that we have “short showers” or turn off “unnecessary lights” (education failure: a few lights are not really the issue, compared to heating and hot water, fridges and freezers, cooking, video streaming, let alone private transport …).

In fairness, it’s patronizing to tell the less well-off to cut back consumption. Cutting back consumption should be done by pretty much everyone, regardless of wealth, with exceptions for the physically vulnerable.

Our sense of entitlement to energy is, alas, so strong that even nature’s warnings of recent years go largely unheeded.


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